Proponents of Rational Expectations Argued That the Sacrifice Ratio

question 172

Multiple Choice

Proponents of rational expectations argued that the sacrifice ratio

• A)could be high because it was rational for people not to immediately change their expectations.
• B)could be high because people might adjust their expectations quickly if they found anti-inflation policy credible.
• C)could be low because it was rational for people not to immediately change their expectations.
• D)could be low because people might adjust their expectations quickly if they found anti-inflation policy credible.

---

Definitions:

Current Assets

Resources anticipated to be turned into cash, disposed of, or utilized within a year or during the operational cycle, whichever period extends further.

Total Liabilities

The combined amount of obligations a company owes to external parties, including loans, accounts payable, mortgages, deferred revenues, and accrued expenses.

Loss on Bond Redemption

The financial loss realized when a bond is redeemed before its maturity date for a price higher than its face value.

Premium on Bonds Payable

The amount by which the bond's selling price exceeds its face value.